Over the last four years, the Russian government has undertaken an unprecedented effort to reform the structure of its military. As part of this effort, it has sought to begin the process of shifting the military to a more professional manning structure, providing it with modern weapons and equipment, and reorganizing it to be prepared to fight the conflicts it is most likely to face in the coming decades. While the reorganization process has proceeded fairly quickly, a demographic crisis and continuing problems in the defense industry will present grave challenges to the military modernization effort in the coming decade.

Military reorganization

At the start of the reform process, Russian military forces had few combat-ready units; most units were staffed only with officers, with the expectation that these officers would command units made up of reservists called up in the event of a major conflict. Planners expected it to take a full year to bring the military to full readiness in such circumstances. This type of structure worked for the Soviet military engaged in the Cold War confrontation with NATO but did not make sense for a military that expected to be involved primarily in local, counter-guerilla and counter-terrorism operations. Being prepared for this type of conflict leads to far less stringent requirements in terms of army strength and mobilization capability, while emphasizing greater professionalism and combat readiness on the part of the military.

To better prepare the military to fight in 21st century conflicts, the Ministry of Defense mandated major changes in command structure to improve command and control. As part of this plan, traditional military districts were eliminated in favor of four Unified Strategic Commands (USCs). Each USC was given responsibility for all conventional military units in its region, in both peacetime and wartime. This was the first step of an effort to create truly joint military forces in which troops belonging to various services are under a single command and able to easily communicate with each other. As part of this change, the military shifted from a four-tier to a three-tier command structure, with combined arms armies and brigades below the USCs. The goal was to make the military more compact and mobile and to allow for rapid troop deployment, all as part of an effort to prepare the military to fight smaller local wars, rather than the huge frontal conflicts of the past.

The second part of the reorganization involved making the brigade the basic unit of the military. The reform created modular brigades that combine three infantry or tank battalions with dedicated reconnaissance, artillery, air defense, logistics, and repair units. These brigades are much more self-sufficient in combat than a regiment, but at the same time more mobile than a division.

The reorganization process was largely completed in 2011. However, the Ministry of Defense is still facing challenges in maintaining the newly formed brigades at a high readiness level and in providing communications equipment to facilitate joint operations involving multiple armed forces branches. These challenges are related to the two greatest problems facing the Russian military: inadequate staffing and outdated equipment.

A continuing manpower shortage

Despite the need for an increase in the number of professional soldiers, the Russian military has largely failed to resolve its manpower shortage. Although it officially has a one-million-man army, actual staffing is around 750,000. The gap between the official position and reality, of course, implies that 25 percent of billets are currently vacant. This does not bode well for the concept of fully manned permanent readiness brigades, which have been at the core of recent military reform efforts.

The manpower shortfall is due to a combination of a rapid decline in the number of 18-year-old men eligible for conscription and an inability to recruit enough contract soldiers to fill the gap in the number of conscripts. Presently, there are no more than 700,000 men reaching the age of 18, of whom only about 400,000 are considered draft-eligible because of various deferments and health exemptions. Furthermore, the severe drop in the birth rate in the 1990s means that within the next two years, the number of 18-year-olds will decline by a further 40%, leaving less than 300,000 draft eligible 18-year-olds. The number of conscripts called up annually has already declined to 270,000.

Some politicians have sought to address the manpower shortage by proposing an increase in the length of conscript service to either 18 months or two years. This is a politically unpopular measure that will most likely lead to popular protest. Given the fragility of the current political regime, it seems fairly unlikely. Furthermore, if it happens, it will signal the rollback of military reform and the victory of the old guard over the reformers.

The military is instead banking on vastly increasing the number of contract soldiers serving in the military. This has been the stated goal of military reformers for many years. But so far they have little to show for their efforts. In fact, over the last 15 years Russia has actually regressed in its ability to attract professional soldiers. In 1995, the Russian military had 380,000 contract soldiers and NCOs in service. Because of a combination of financial problems and resistance by senior generals, by 2003 this figure had shrunk to135,000. Since then, there has been a modest increase to190,000. The MOD has set a target of reaching 425,000 contract soldiers by adding 50,000 per year starting in 2012. To this end, it has increased salaries and improved living conditions for soldiers. Despite these actions, it is falling short of its recruiting targets for this year and is not assured of continued financing for contract soldier recruitment going forward. Given its manpower problems, the military would do better to abandon the fiction that the Russian military has one million personnel and admit that 800,000 is a more realistic target going forward.

Outdated armaments

The Russian military is also facing a crisis in its equipment. Because of a lack of funding, the military received virtually no new equipment between 1993 and 2008. As a result, the vast majority of its armaments are both physically old and based on outdated designs. To deal with this problem, the Russian government has begun to implement a 10-year and $650 billion State Armament Program. The program’s goal is to ensure that 70 percent of the Russian military’s equipment is modern by 2020. The program’s top priorities are to re-equip the Strategic Rocket Forces, the air force, the air defense and space forces, and to provide more advanced command and control equipment for the military.

The program suffers from a number of problems. First of all, when Russian officials discuss their goals for procuring modernized weaponry over the next 10 years, they never define their terms. They do not have a list of what types of armaments are considered modern. In some cases, systems that are based on 20-50 year old designs are described as modern. This inevitably leads to the conclusion that the MOD is implicitly defining modern equipment as any equipment that was procured in the last few years, rather than equipment actually based on new designs.

More importantly, analysts have grave doubts that the program will actually be carried out. Prominent Russian political figures have argued that the government cannot afford to spend such sums on rearmament given the need to revitalize the country’s civilian infrastructure and the need to fund social programs in a deteriorating economic environment. Last summer, senior officials were considering a decrease in procurement funding for the next several years. Some sources indicated that the entire State Armament Program would simply be extended for three years—that is, it would run through 2023 rather than 2020.

Even if procurement funding is maintained at planned levels, there are grave doubts about the Russian defense industry’s ability to produce modern weapons. Only a few enterprises have modernized their facilities and begun to work on new designs. The rest have outdated equipment and are not prepared to fulfill the military’s needs. Most are continuing to lose skilled workers because the civilian sector can pay higher salaries. This is in addition to the disappearance of an entire age cohort (ages 30-50) who didn’t go into the field over the last two decades because of its lack of financing and low prestige. Even companies that have modernized are dependent on subcontractors for their supply chains, and these subcontractors are often in much worse shape.

There are also problems with the defense industry’s organization. As part of Russia’s overall re-centralization under Putin, the Soviet-era sectoral ministries were largely restored as holding companies (United Shipbuilding, United Aircraft, Rostekhnologii). Many of the constituent units of these companies are dysfunctional — with the more effective units used to keep the effectively bankrupt ones afloat. All this means that the modernization of the industry has only barely begun. And it is difficult to understand how the State Armament Program can be fulfilled without the modernization of the defense industry.

Here’s an interview I just did with RIA-Novosti’s Valdai Club. It originally appeared here: http://valdaiclub.com/culture/52720.html.

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In your opinion, is there any tension between ethnic Russians and so-called Muslim communities in large cites like Moscow and Saint Petersburg?

Sure, of course there is tension. I think there are different kinds of tension, depending on the communities. One of the more visible forms is tension between migrants from the Caucasus and Russians in the major cities. But not just in the major cities. A few years ago, we saw the riots in Kondopoga. So you mentioned Moscow and St. Petersburg, but it goes beyond them, there are a lot of smaller communities too, and in places where there’s a sizable presence of different groups, there can be tension.

The tension comes from both sides. On the one hand, there are migrants coming in, who are trying to preserve a somewhat different culture from what they’re finding in the new place. And so that leads to resistance from the people who have lived there longer – from the dominant culture, let’s say. But on the other hand, the migrants are responding to discrimination from the majority group, so there are sources of tension on both sides.

Does Russia have a thoughtful ethnic policy? Or do Russian authorities try to solve problems ad hoc?

There is a policy, but it’s somewhat rudimentary. It’s more of an inertial policy, in that rather than actively trying to shape the situation, it’s continuing policies that are partially left over from the Soviet Union, and partially left over from the Yeltsin period. So Russia still has the big overarching set of institutions with ethnic regions, for example, left over from the Soviet Union, and it really hasn’t been modified very much in terms of how these republics operate. On the regional level, there’s less freedom to implement policies on ethnic culture and language than there was in the Yeltsin period. But it’s more a matter of degree, rather than a categorical difference.

On the other hand, there were changes from the Soviet to the Yeltsin period. For example, eliminating the requirement to list one’s nationality in forms and in the internal passport made it easier for people to change their ethnic identity, if they chose to do so. But that was something that was implemented already in 1997 or ’98. And so, what’s been going on since then is the political leadership trying not to rock the boat too much.

Apart from politics and political rights in the USSR what is worthy in the idea of Soviet supranational identity?

I think it’s a necessary idea that any country that wants to maintain itself as a united country needs to have some identity that includes everyone who lives there. So the Soviet identity, then this Rossiskaya identity that came in after the collapse of the Soviet Union, were very much needed. The innovation is not this supra-ethnic identity, because there are lots of countries in the world that do this. Let’s say South Africa has a lot of different ethnic groups, each of which has an ethnic identity, but there’s also an idea that everyone is also a citizen of South Africa, so there’s this distinction between ethnic identity and what we might call national identity. That’s common around the world.

The Soviet innovation was to try to make a different kind of category, this idea of the Soviet people – Sovetsky narod – where it was being promoted concurrently with ethnic identities and for a period of time almost as an alternative to those identities. It didn’t last long enough to really change identities. And it was countered, because there wasn’t any real way for people to shift to just the Soviet identity. So in that sense, it didn’t really turn into an overarching identity that everyone could accept. But if it were not for the need for people to state their nationality in their passports, etc, in a few more decades it could have led to the creation of a real supra-ethnic identity. I don’t know if this would have been a good thing or not, but it would certainly have led to a very different political environment.

Can you see any voids in Russian legislation pertinent to ethnic policy? Which norms and acts need to be adjusted in order to regulate relations between ethnic communities in Russia?

I don’t think that necessarily legislation is what is needed. I see it more in the realm of policy rather than law, so what is needed, to my mind, is more effective measures to integrate newcomers to a city or a town with people who have lived there for a while, in terms of education and mechanisms for adjustment. I’m not sure that a legal change, a big law, would be necessary.

What would be very much counterproductive is if the government followed through on the occasional proposals to get rid of ethnic republics and replace them with non-ethnic regions, such as having Kazanskaya oblast instead of Tatarstan. If the government started from a completely blank slate, then that might be an option, although it would lead very quickly to assimilation of minorities, so that would certainly not be a good thing for the minority groups. But in the current situation where ethnic republics already exist, it’s a recipe for instability, not just negatively affecting just the minority groups, but also leading to tension and conflict.

So I don’t think that a grand new law to change relations between ethnic groups is the way to go. What Russia needs instead is more grass-roots measures to help minority groups adjust to their new environment, together with efforts to train the police not to discriminate against minority groups, because like I said, it works both ways; the police’s biased attitude towards minority groups and migrants certainly aggravates their grievances.

I’m resuming posting briefs I write for Oxford Analytica. This one was published in early September.

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In July, news broke that Iran had filed an arbitration case in Geneva seeking a 4 billion dollar fine against Russia for cancelling its contract to sell S-300 anti-aircraft missile systems to Iran. There has been speculation that the claim is actually part of a move by the two sides to restore the contract, perhaps as part of a larger deal that would have Russia resume significant military sales to Iran. In fact, Tehran’s move has angered Moscow.

Impact

o The presence of the S-300 systems would make Iranian nuclear installations much less vulnerable to attack by Israeli or Western forces.

o The situation complicates Russia’s relations with Iran, and makes it harder for Moscow to maintain ambiguity on Iran’s nuclear programme.

o It is possible that Moscow has already threatened, in private, to cease UN Security Council vetoes of anti-Iranian resolutions.

o If it moves forward, the case in Geneva is likely to be decided in favour of Russia.

What next

Tehran’s lawsuit may result in at least a temporary cooling of Russian-Iranian relations and a corresponding opportunity to increase international pressure on Iran over its nuclear programme. Russia is less likely than ever to resume sales of weapons to Iran in a situation where such a move would be seen as caving in to Iranian pressure. Instead, Moscow will seek to pressure Tehran to withdraw the claim without preconditions, and may publicly threaten to stop vetoing anti-Iranian resolutions in the UN Security Council if Tehran does not comply.

Analysis

The contract to sell five S-300PMU-1 battalions to Iran for 800 million dollars was originally signed in December 2007. The Russian government promptly became subject to a great deal of private and public lobbying by Israel, the United States and other Western countries that sought to have the deal cancelled.

Russia reverses its decision

Although the Russian government has resisted Western pressure for several years, it decided to cancel the contract in September 2010. Soon after the passage of UN Security Council Resolution 1929, which imposed sanctions banning the sale of most missile systems to Iran, then-President Dmitry Medvedev went further by announcing that Russia would stop virtually all military exports to Iran. The Russian government then returned the 167 million dollar advance it had received from Iran for the missiles. The units themselves were disassembled. The total losses to Russian arms exporters as a result of the freeze on military sales to Iran could be as a high as 1 billion dollars per year.

Iran has periodically sought to restore the contract. These efforts initially consisted of quiet diplomacy, followed by public complaints. To increase pressure on Russia, in April 2011, the Iranian government filed a case with the International Chamber of Commerce in Paris, claiming damages of around 900 million dollars from the cancellation of the contract. Iran’s argument is that the UN-mandated sanctions approved in 2010 did not apply to the S-300 missiles, since these were ground-to-air missile systems and designed primarily for defensive purposes. Observers largely agree that Russia’s move went beyond what the UN sanctions required.

The S-300 dispute generated widespread attention again this summer, as the Iranian government withdrew its case from the Paris tribunal. Tehran refiled it at the International Court of Arbitration in Geneva, and raised the damages sought to 4 billion dollars. Neither side drew attention to the lawsuit; information about the filing became public in July with the publication of the annual report of Rosoboroneksport, Russia’s state arms dealer. Since Rosoboroneksport is listed as the defendant in the claim, the potential liability was listed in the report.

Iranian officials have repeatedly noted that they are not interested in receiving the money they would get by winning their case. Iran saw Medvedev’s decree as a public humiliation that affected its pretensions to status as a regional power, in addition to reducing its ability to defend itself against possible Israeli or US air strikes.

Iran wants contract restored

The Iranian ambassador to Moscow has openly stated that should Russia agree to send the missiles, Iran would withdraw its suit. The implication is that Iran was using the suit in order to pressure Moscow to reinstate the contract. The size of the claim is equal to one-third of Rosoboroneksport’s annual revenue.

Tehran makes serious miscalculation

Tehran believes that the return of Vladimir Putin to the presidency, combined with escalating war of rhetoric on the part of Israel vis-a-vis Iran, has created a window of opportunity for Russia to reconsider its decision. It may be easier for Putin to restore the contract than it would have been for Medvedev, who signed the original decree to cancel the sale. Iranian leaders also believe that Russia wants to avoid the regional chaos that would most likely follow Israeli or US air strikes against Iranian nuclear facilities. One way of preventing such strikes is to bolster Iranian defences against air attack, which is the main purpose of S-300 missile systems.

However, if Iranian leaders believe that putting financial pressure on Russia will force them to resume arms sales, they have miscalculated. Russian leaders have already indicated that they will take a harder line against Iran’s nuclear programme if Iran does not withdraw the suit. One Kremlin official was quoted stating that if Tehran does not withdraw its claim in the near future, it will be on its own in dealing with the international community on nuclear issues.

Change of tactics

Iran appears to have recognised its error in judgment and has already begun to back off. The Iranian ambassador said that the size of the claim was increased by the court, rather than by Tehran. This seems unlikely, as even if the court chose to include punitive damages without an explicit request from Iran, the amount would have been discussed with the plaintiff in advance.

An end in sight?

Russia does not want to be seen as Iran’s pawn. At the same time, Moscow wants to maintain an ambiguous position on Iran’s nuclear programme — seeking to prevent Tehran from acquiring nuclear weapons while helping it resist Western pressure to completely shut down its nuclear programme, which Tehran insists is for peaceful purposes.

While the case is unlikely to result in a long-term shift in Russian-Iranian relations, it may damage the relationship in the short term. Iran will test the domestic Bavar 373 long-range air defence system during military exercises in October. If the system proves successful, Tehran may feel less of a need to continue seeking the S-300 and may decide to end the episode by withdrawing its claim.

Yesterday, I discussed some of the findings of a report by Viktor Murakhovsky and Ruslan Aliev on the effectiveness of arms imports, international cooperation and technology transfer in Russia’s military industrial complex. Today, I conclude the discussion by looking at the parts of the report that examine specific examples of import deals, the risks of import dependence, and the report’s overall conclusions.

The report notes that the Russian procurement system has no way of determining the gaps in domestic procurement that have to be addressed through imports. It also has no way of choosing among alternative types of weapons systems when making foreign procurement decisions, given its lack of experience with open international tenders. Finally, it has little experience in formulating advantageous contracts with foreign defense firms through means such as offsets and joint R&D. Instead, decisions on imports are usually made because of the personal or political interests of key decision-makers in the MOD and at the highest levels of government. The report mentions a few examples:

Israeli UAVs that were purchased in 2009-10 are relatively outdated, have limited uses, and do not allow for the study and transfer of current technologies. This contradicts the stated purpose of the deal, which (in the words of former Deputy Defense Minister Popovkin were to transfer current technologies to our defense industry so that we can with their help develop our own prototypes of needed weapons and technology.”

IVECO LMV M65 “Lynx” armored vehicles, 10 of which were purchased in 2010 for testing. A contract to build 1775 of these armored vehicles at an Oboronservis/Iveco joint venture in Voronezh was signed in 2011, without any kind of open tender being conducted. Furthermore, it was signed before testing on the vehicles was completed and without a discussion of what role the vehicle would play in Russia’s military. According to the report, the likelihood that the plan to use 50% local components in the vehicles’ construction is very doubtful because many of the components belong to other foreign firms that have not agreed to license their production to Russian firms. The contract was signed without an open competition.

The Mistral amphibious assault ship has been criticized in Russia because Russia does not need such a ship, does not have the infrastructure to maintain the ship once it is built, and the government’s ability to finance serial production is highly uncertain. The authors argue that there is no clarity on whether Russia will get useful technology, such as the SENIT 9 tactical combat information system and the SIC-21 battle group C2 system, as part of the deal. Other components, such as the power plant, come from European advances in civilian shipbuilding and could be acquired commercially for a Russian-built ship without any problems. The most attractive feature of the Mistral for the Russian Navy is its multifunctionality; it would be highly useful for the RFN to have a ship that can serve as an all-in-one barracks, HQ, hospital, helicopter carrier, and amphibious landing ship. But there are other options for these types of ships, and a tender could have led to a more advantageous deal.

The establishment of a training center in Mulino by the German Rheinmetall Defense Company is the one positive example of foreign procurement cited in the report. In this case, there are well-defined Russian subcontractors on board, the offsets are included in the contract, and Russian companies will benefit from the experience of technical integration by being involved in the project. (There’s no mention of open tenders here, though. I’m not sure why the authors don’t care about this factor in this one case — DPG)

The report’s final substantive section addresses the risks and benefits of dependence on imports of military technology. Risks include the possibility that the selling country will not be able or willing to supply needed parts or armaments in wartime and even blocking functionality of electronic systems and components should the purchasing side get involved in a conflict with an ally of the selling country. Excessive dependence on imports would also have negative consequences for domestic defense industry. However, if done right, imports would provide a number of benefits for Russia, including the ability to study and adopt the technical solutions used in foreign equipment, the ability to quickly fulfill the needs of the military in areas where domestic defense industry is weak, the possibility of establishing joint production of some types of equipment that could then be sold at a profit to third countries. The authors then spell out a number of factors that would allow Russia to have an effective system for importing military equipment. These include open tenders, offsets, requirements for tech transfer and local licensed production, the establishment of clear rules that apply to all decisions on import of foreign military equipment, guarantees that support for imported equipment would be provided regardless of future circumstances, and the depoliticization of future deals. They highlight three criteria for importing equipment: 1) it must be needed by the military, 2) it must not have suitable domestic analogs, and 3) it must not be critical for the military’s needs, reducing the risks of a breakdown in deliveries. Based on these criteria, the types of equipment that Russia might want to import in the near future include communications and navigation systems, aircraft engines, sniper equipment, and UAVs. France and Italy are listed as the most suitable partners, due to the qualifications of their defense enterprises and past experience in cooperation.

The report ends with a set of overall conclusions:

The military needs to import arms and equipment because of the prevalence of outdated equipment in the military and the defense industry’s inability to produce equipment of all types.

The import of military equipment carries significant risks for security and for the future of domestic defense industry.

The import of military equipment must be organized so that all decisions are made according to a single set of rules, with the involvement of both the state and domestic defense industry representatives. Tenders, offsets, and guarantees of support must be part of all contracts.

In most areas of military production, there is no need for imports. In some areas imports are needed in order to study foreign experience so as to improve future domestic production.

Tech transfer and joint production are of greatest interest for Russia.

Laws on the import of high tech components need to be simplified.

The MOD must take the needs of defense industry into account in formulating its procurement and import policies, in order to ensure that defense industry capabilities are maintained and improved.

Russian defense industry needs to be subjected to a technology audit in order to clearly formulate its problems and goals. This audit would help in formulating an import strategy.

All import contracts need to be audited to ensure that they are financially and technically sound. Doubtful contracts should be suspended.

Institutional imbalances between the MOD and defense industry need to be corrected.